MUMBAI, November 5: The Indian rupee declined by 9 paise to 94.55 against the US dollar in early trade on Thursday, as strength in the American currency in overseas markets put pressure on the domestic currency.
At the interbank foreign exchange market, the Indian rupee opened at 94.36 against the US dollar before slipping to 94.55. This marked a decline of 9 paise from its previous closing level of 94.46.
On Wednesday, the Indian rupee had gained 29 paise to close at 94.46 against the US dollar, extending its gains for a second consecutive trading session.
Forex market participants said positive sentiment in domestic equity markets and falling crude oil prices helped limit the rupee’s decline.
US Midterm Election Results Influence Global Markets
The outcome of the US midterm elections has emerged as a major factor influencing global financial markets. The Democratic Party’s victory in both chambers of Congress has raised expectations that the Donald Trump administration could face greater legislative restrictions on further military escalation in the US-Israel conflict with Iran.
Investors are increasingly anticipating diplomatic efforts to reduce tensions in the region, which could help ease concerns over global energy supplies.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said financial markets were rapidly removing the geopolitical risk premium built up during the conflict.
He noted that a Democratic-controlled Congress could limit funding for further military escalation and increase pressure for diplomatic negotiations in the near term.
Brent Crude Falls Below $100 a Barrel
Falling crude oil prices provided some relief to the Indian economy, which depends heavily on imported energy.
Brent crude, the global oil benchmark, was trading 1.04 per cent lower at $93.64 per barrel in futures trade on Thursday.
The benchmark had plunged more than 8 per cent in the previous trading session, recording its steepest single-day decline since May and falling below the psychologically important $100 mark.
The sharp decline followed the US midterm election results, as investors assessed the possibility of reduced military tensions in the Middle East and a potential recovery in oil supplies.
For India, lower crude oil prices can help reduce the country’s import bill and ease pressure on foreign exchange reserves and the rupee.
Dollar Index Trades Lower
Meanwhile, the US Dollar Index, which measures the strength of the greenback against a basket of six major currencies, was trading at 101.22, down 0.34 per cent.
Despite the decline in the dollar index and crude oil prices, the Indian rupee remained under pressure during early trade.
Sensex Surges Over 1,400 Points, Nifty Gains Nearly 379 Points
While the Indian currency declined, domestic equity markets opened strongly on Thursday.
The BSE Sensex jumped 1,403.71 points to reach 78,689.87 in early trade.
Similarly, the NSE Nifty surged 378.85 points to 24,340.40.
Foreign Institutional Investors (FIIs) also remained net buyers in the Indian equity market on Wednesday. According to exchange data, they purchased shares worth Rs 7,284.03 crore during the session.
The strong buying by foreign investors added to the positive sentiment in domestic stock markets.
Going forward, the movement of the Indian rupee will largely depend on global dollar trends, crude oil prices, foreign investment flows and developments in the geopolitical situation involving the United States and Iran.
